AUD/CAD traded higher yesterday after the BoC abandoned its hike bias, and returned briefly back above the upside line drawn from the low of March 1st. That said, it was quick to give back those gains and to return back below the upside line. In our view, the fact that the rate is trading below that line, as well as below all three of our moving averages, paints a negative near-term picture.
A clear and decisive dip below 0.9445 would confirm a forthcoming lower low on the 4-hour chart and may see scope for downside extensions towards the 0.9415 support zone, which is defined by the lows of April 2nd and 3rd, and it is also near the lows of March 19th and 20th. If that zone fails to stop the rate from drifting lower this time around, its break may allow the bears to put the 0.9390 zone on their radars. That area provided decent support back on March 6th and 14th.
Shifting attention to our short-term oscillators, we see that the RSI rebounded from near its 30 line, and it then turned flat, while the MACD, although below both its zero and trigger lines, has also turned sideways, signaling that it could bottom soon. These indicators detect slowing downside speed and thus, we will stay cautious of another corrective bounce before the next leg down, perhaps for the rate to test the 0.9480 level, or the aforementioned upside line.
That said, in order to start examining whether the bears have abandoned the battlefield, at least in the short run, we would like to see a clear break above the psychological territory of 0.9500. This would confirm the rate’s return above the upside line drawn from the low of March 1st and could allow the pair to travel towards the 0.9540 resistance, marked by the high of April 23rd. If that level fails to hold and the rate emerges above 0.9550 as well, then we could experience bullish extensions towards the high of April 19th, at around 0.9580.
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